Research Discussion Papers, Bank of Finland
No 27/2002:
Links between securities settlement systems: An oligopoly theoretic approach
Karlo Kauko ()
Abstract: This paper presents a duopoly model of the securities
settlement industry. Because pooling a large amount of payments can help in
using liquidity efficiently, issuers prefer systems where a large number of
securities are issued. If the central securities depositories establish a
mutual link that enables investors to make transactions with foreign
securities, cost savings can be achieved. However, these links may have
unexpected effects on CSDs’ pricing, and the issuers’ share of the fee
burden can increase substantially. It is not advisable to ban additional
fees for using the link, as the CSDs might simply increase the fee for
domestic transactions.
Keywords: oligopoly; securities settlement systems; (follow links to similar papers)
JEL-Codes: G20; L13; (follow links to similar papers)
34 pages, April 13, 2002
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